KPMG Capability Index
ODI will provide research services to better understand the capabilities and aptitude of a country’s economy and society. While a number of factors can influence a country’s ability to adapt and thrive, measuring the capacity to respond to crises and structural change is a key indicator in determining a country’s ability to make effective use of aid, develop and prosper.
An index of a country’s capacity to respond to crises would need to measure its capacity to diversify and engage in new products and services, restructure, adapt and absorb aid. Specifically, it may need to cover:
- Education levels
- Economic aspects such as ability (and economic space) to engage with science and technology (R&D; patents), skills, etc. To be effective such an index would need to:
- Distinguish inputs from outputs which are mixed up in the WEF indicators,
- Differentiate from existing UN and World Bank indices) by emphasizing capabilities and policy relevant actions, rather than outcomes.
- Structural variables
- Institutional aspects, e.g. government capacity (e.g. quality of bureaucracy, numbers of staff).
- Effectiveness of state-business relations; such measures would deal with underlying processes not just headline numbers (a critique of existing CPIA measures).
- Social fabric necessary for engaging in structural change and / or responding to crises. Much of these data are being measured annually by other organizations, but will need to be analysed and combined for this capability index.
A country specific indicator which measures the ability to respond to crises and absorb aid is likely to attract attention of donor counties and agencies to understand which countries can adopt/adapt to change and why. An index provides a benchmark and signals which countries are better prepared to cope. This could help donors spot potential problems in the future. The evaluation of a country using this index will be a key indicator in determining a country’s ability to make effective use of aid, develop and prosper. Policy makers in emerging countries will also use this index to improve their adaptability to crisis and ability to use aid effectively.
Dirk Willem te Velde
Director of International Economic Development group, Principal Research Fellow